Many Consumers Will Always Buy "Good Enough Value" Home Broadband

Some question the long-term viability of 5G fixed wireless services, arguing that, eventually, it will prove unable to compete with ever-higher capacities supplied by cabled networks, especially fiber to home platforms. 

Supporters might make the case that “eventually” is the key phrase, as the market potential for fixed wireless between “today” and “tomorrow” is likely to be quite extended. At the moment, perhaps 51 percent or 52 percent of all U.S. homes or dwelling units have service available from at least one provider. 

By 2030 that percentage might increase to 76 percent to 80 percent. 

At the moment, perhaps 10 percent to 15 percent of U.S. homes have FTTH service available from at least two providers, growing to possibly 30 percent to 40 percent by 2030. 

For starters, FTTH is expensive enough that no single service provider can afford to build new networks ubiquitously, even if the customer demand is present. By some estimates, the cost to pass one urban home might be just $1,000, but the cost to pass suburban locations might range up to $3200, while rural passings can easily cost $7,000 or more. 

Area Type	Density	Estimated Cost per Home/Passing
Metropolitan	High	$1,000
Suburb (Flat Terrain)	Medium	$2,700
Suburb (Hilly Terrain)	Medium	$3,240
Rural (Flat Terrain)	Low	$6,300
Rural (Hilly)	Low	$7,000

And that is construction cost only, not including the cost to activate an account, which can add costs between $300 to $500 for each install. 

An equally-important issue is the take rate for such networks. It has been common for any new FTTH provider that is a telco to get up to 40 percent take rates over a few years, with initial uptake in the 20-percent range, often. Independent ISPs competing with both cable operators and a telco might expect take rates not exceeding 20 percent (where the cable operator can offer gigabit service and the telco does not offer FTTH). 

So the longer-term issue is how big the market might be for wireless service offering speeds in the lower ranges (100 Mbps to 200 Mbps now; undoubtedly higher speeds in the future), as more fiber access is available. To the extent that fixed wireless is taking market share from cable operators (perhaps even operators able to sell gigabit-per-second connections), we can infer that a substantial portion of the market is happy to pay the prevailing rates for access at such speeds, especially when able to bundle home broadband with their mobile access services. 

When comparing fixed wireless to either cable modem or FTTH service, many consumers might not be especially interested in services operating the 500-Mbps and faster ranges, much less gigabit ranges, when the slower speeds cost less. 

But demand will continue to shift over time, with most consumers eventually buying services operating faster than 200 Mbps, and in many instances much faster than 200 Mbps (gigabit to multi-gigabit ranges, for example). To be sure, fixed wireless providers are likely to find ways to increase their speed tiers as well, beyond 200 Mbps in the future, even if virtually all observers suggest wireless will continue to lag cabled networks in terms of speed. 

Speed Tier Take Rates, in Percentage	2023	2030	2040
Less than 100 Mbps	20-30	5-10	1-2
100 Mbps to 200 Mbps	30-40	10-20	5-10
Faster than 200 Mbps	30-40	70-80	85-90

Perhaps the best analogy is what cable operators have been able to do with their hybrid fiber coax networks, boosting speeds over time. 

Keep in mind that cable networks and FTTH networks back around 2000 were only offering top speeds in the 10-Mbps range. Fixed wireless networks also will be able to increase speeds over time, if never on the scale of cabled networks. 

Year	Typical Cable Operator Maximum Speed
1996	1.5 Mbps
Early 2000s	10 Mbps
Late 2000s	50 Mbps
2010	100 Mbps
2015	300 Mbps
2016	1 Gbps
2024	2 Gbps

But absolute ability to match cabled network speeds is not the question. The issue is what percentage of customers will, in the future, be willing to buy fixed wireless home broadband, at then-prevailing speeds, prices and offers. 

High-Cost Home Broadband Subsidies Work

Very few major social problems have clear and uncomplicated causal relationships, which makes virtually impossible the task of determining whether public policies actually work, or not. 

For complex social problems like poverty, housing, crime, education, carbon reduction or traffic, it remains quite difficult to prove causal links between policies and outcomes. Basically, policies are tried without any real way of knowing whether they work. 

Contrast that with a few instances where the primary causation mechanisms are relatively clear. The causal link between smoking tobacco and various health issues like lung cancer, heart disease, and respiratory problems is well-established.

There is a direct causal relationship between alcohol consumption and impaired driving leading to accidents and fatalities.

Conditions such as scurvy (vitamin C deficiency) or rickets (vitamin D deficiency) have clear causation mechanisms related to lack of specific nutrients in the diet. Likewise, the danger of lead exposure, especially in children, is clear.

The overuse and misuse of antibiotics in healthcare and agriculture has a direct causal relationship with the development of antibiotic-resistant bacteria.

Home broadband supply now is likely one problem for which we know at least one causal relationship, namely that financial subsidies work. Since the cost of home broadband infrastructure is directly related to population density, financial subsidies are required in low-density rural areas. 

Urban households tend to have access to better home broadband than households in rural areas, rural residents might note, policymakers might agree and OpenSignal says. 

And though there are correlations between income, education and age in any market, “income levels are less predictive of reliability than density,” OpenSignal notes.

It might be noteworthy that although sharing of network infrastructure often is touted as a way of reducing the cost of home broadband infrastructure, OpenSignal studies find there is no correlation between network infrastructure sharing and either high reliability or a narrow digital divide. “Countries with limited infrastructure sharing but targeted subsidies for private rural investment mostly perform better than those relying on widespread infrastructure sharing,” OpenSignal notes.

Topography and density are key factors in the size of the divide between urban and rural home broadband experience. 

Markets with highly-concentrated populations in urban areas show small gaps between urban and rural reliability, and spread-out middle-income countries with difficult terrain show big gaps. “But a few countries with lots of medium-density areas, like the U.S., and Spain, have relatively small digital divides,” the firm says. 

In fact, the U.S. market might better be characterized as having huge low-density areas. population density has a huge impact on the cost of building new networks, mobile or fixed, but especially fixed networks.  

U.S. population density is quite thin across most of its geography, which directly affects the cost of building broadband networks, as hefty subsidies are required to reach the last one percent or two percent of remote locations. 

And the United States has a huge percentage of its land mass that is thinly settled, if at all settled. In Canada, 14 percent of the people live in areas of density between five and 50 people per square kilometer. In Australia, 18 percent of people live in such rural areas.

In the United States, 37 percent of the population lives in rural areas with less than 50 people per square kilometer.

Put another way, less than two percent of Canadians and four percent of Australians live in such rural areas. In the United States, fully 48 percent of people live in such areas.

Put another way, about six percent of the U.S. land mass is “developed” and relatively highly populated. Those are the areas where it is easiest to build networks. But about 94 percent of the U.S. land surface  is unsettled or lightly populated, including mountains, rangeland, cropland and forests. And that is where networks are hardest to build and sustain.

So it should not at all be surprising that broadband reliability is, on average, 23 percent higher in urban areas than in rural areas across all markets we analyzed,” say analysts at OpenSignal. The firm uses a 100 to 1000 point scale to measure broadband experience in a typical household where multiple devices are used simultaneously. 

The metric is based on ability to connect (uptime); ability to complete tasks and speed, latency, jitter performance. 

source: OpenSignal 

Financial subsidies for service providers in rural areas are one way governments try to close digital divides, and arguably are the most effective ways to do so. Whether in the form of subsidies for anchor institutions or per-passing or per-connection support is the clearest way to reduce the cost of rural infrastructure for suppliers. 

Beyond that, policymakers often try to encourage competition and promote deployment of alternative platforms (satellite, fixed wireless, mobile access). 

Governments can help communities create cooperatives; reduce permitting and other regulatory costs or train people to use broadband. But perhaps nothing works so well as simple subsidies, for the simple reason that population density and network cost are inversely related. 

High population density leads to lower costs; low density leads to higher costs. So subsidies for home broadband in rural areas are a relatively clear example of cause-and-effect relationships. 

Have Home Broadband Prices Gone Up, Down or Sideways since 2000?

It is hard to say, for certain, whether home broadband prices in the U.S. market have increased, decreased or stayed the same since about 2000, for several reasons. One can measure without adjusting for inflation. One can measure the “price most people pay,” which does not account for hedonic changes (better performance for the same price). Or one can measure any specific speed tier and its price over time. 

Without adjusting for inflation; consumer product choices or hedonic product changes, one might argue that prices have risen. Then there is the matter of whether survey respondents report the full price or only the advertised price before taxes and fees.  

Based on 2000 and 2023 typical prices, not adjusted for inflation, some might argue prices have stayed consistent, ranging between $30 and $75 a month for most of two decades. 

But there has been hedonic change, as downstream speeds have grown about two orders of magnitude, even if typical prices have remained roughly in the same ranges over time.  

 

Year	Average Download Speed (Mbps)	Typical Pricing Range	Sources
2000	0.5 - 3	$30 - $100+	AllConnect, NCTA
2005	3 - 6	$20 - $80+	AllConnect, NCTA
2010	10 - 25	$40 - $70+	AllConnect, NCTA
2015	25 - 50	$50 - $80+	AllConnect, NCTA
2020	50 - 100	$40 - $70+	AllConnect, NCTA
2023	100 - 200+	$30 - $100+	AllConnect, NCTA

T-Mobile Probably Can Compete for 25% of the Home Broadband Market

A new Ookla report on mobile speed performance cites T-Mobile’s 5G network at 221 Mbps downstream. Compare that to Ookla’s average for fixed network internet service provider speeds at 213 Mbps. 

To the extent that T-Mobile’s fixed wireless service can attain such speeds, it arguably would be faster than the typical home broadband service purchased by, and experienced by consumers. 

That does not mean home broadband providers are not, in many instances, able to sell faster services in the gigabit ranges, for example. It simply is not a service “most” consumers of home broadband are buying, right now. 

Looking at U.S. customer behavior, it appears that about 25 percent of the market is willing to buy service that tops out at about 200 Mbps. If T-Mobile can boost fixed wireless speeds to about 400 Mbps, it could appeal to about 60 percent of U.S. customers. 

source: OpenVault 

"You Get to Keep Your Business" is the Value of 5G

Though we are early in its life cycle, some argue 5G remains “revolutionary,” a “transformative leap” that will “reshape” connectivity. Others say it is a disappointment, either as a driver of near-term enterprise use cases, or as an enabler of higher-value, higher-revenue consumer mobile services.  

The eventual “truth” is likely to be far more nuanced. Some valuable new lines of business eventually could emerge. By design, 5G supports device density quite a bit higher than was available on 4G or earlier networks. By design, 5G supports network slicing, which enables private networks with some quality of service features. 

But 5G was always going to be a bit of a disappointment for most consumer accounts, which drive roughly 60 percent of total mobile operator revenues, for reasons related to the dynamics of all internet access and transport services. 

At a high level, demand for data consumption does not have a revenue elasticity that matches the consumption elasticity. In other words, mobile and fixed network operators cannot assume that increases in supply will produce increases in average revenue per unit that match the rate of consumption. 

To be sure, typical recurring charges for home broadband, for example, have increased since 1990, and access speeds for home broadband have risen as well. The cost to supply, on a per-unit basis, arguably is less important than the ability to charge more for higher consumption or higher speed. 

In the U.S. home broadband market, for example, per unit prices have plummeted, but typical  home broadband speeds have grown by an order of magnitude about every decade. Retail prices for stand-alone home broadband have not increased that fast, taking five decades to grow an order of magnitude. 

Year	Typical Speed	Typical Data Consumption	Price per Unit	Monthly Consumer Subscription Charges
1990	14.4 Kbps	10 megabytes	$1 per megabyte	$20 per month
2000	1.5 Mbps	100 megabytes	$0.1 per megabyte	$30 per month
2010	10 Mbps	1 gigabyte	$0.01 per megabyte	$50 per month
2020	100 Mbps	10 gigabytes	$0.001 per megabyte	$70 per month
2023	1 gigabit per second	1 terabyte	$0.0001 per megabyte	$100 per month

The key business takeaway is that supplied capacity must continue to increase, but will happen faster than price increases to match. 

Mobile operators have arguably had better outcomes where it comes to capacity supply and retail prices. In the U.S. market, it has taken three decades for prices to increase by an order of magnitude, as capabilities have grown three orders of magnitude. 

Year	Typical Speed (Mbps)	Typical Data Consumption (GB)	Price per Unit (GB)	Monthly Consumer Subscription Charges (\)
1990	1	0.1	100	20
2000	10	1	10	50
2010	100	10	1	100
2020	1,000	100	0.1	150

For such reasons alone, revenue expectations for faster mobile or fixed network internet access are likely to remain challenging. The argument that 5G would bring significantly-higher revenues, in the form of the ability to “charge more” for access speed, always was going to be quite difficult. 

It remains to be seen how much incremental new revenue might be created by internet of things connections, private networks or edge computing, the services most-often cited as “new” enterprise features of 5G. 

As it has happened, an unexpected “new” revenue source of some significant magnitude--in the form of 5G fixed wireless for home broadband--has developed rather quickly. 

Mobile Operator	Subscribers (Q1 2023)	Annual Subscription Revenues (Q1 2023)	Growth Rate (Q1 2022 - Q1 2023)
T-Mobile	3.2 million	$1.2 billion	120%
Verizon	1.5 million	$600 million	100%
AT&T	0.5 million	$200 million	50%

Whether one views such new revenue sources as “revolutionary” or “merely” significant is the issue. Still, the growth of 5G fixed wireless for home broadband clearly is important for contestants in the home broadband space. 

And 5G fixed wireless remains, at the moment, the clearest “new” revenue source for mobile operators. It always is conceivable that other enterprise-focused revenue streams will emerge as well, though the magnitude of those revenue streams remains more uncertain.

The point is that we likely err when arguing either for “revolutionary” or “disappointing” outcomes for 5G. We still are early in global deployment. New revenue sources generally take time to develop. 

But 5G remains vitally important for other reasons. All internet access providers, all data transport providers and data centers must increase capacity on a sustained basis. Each new mobile generation is the way that capacity increase happens.

Mobile operators may indeed be disappointed at the revenue outcomes from 5G so far. But 5G is essential for protecting the value of the business, as will be true of 6G and subsequent platforms. 

“You get to keep your business” might sound like a rather-trivial outcome. It is not.